State Land Board ends sale of Elliott State Forest; next move unclear

Tuesday, May 9, 2017

The State Land Board voted unanimously Tuesday to terminate the Elliott State Forest sale and pursue other options for continuing public ownership of the land.

A packed room watched the first time the three board members were able to discuss the sale since their last meeting Feb. 14. The State Land Board members can’t talk to each other without creating a quorum and invoking public meeting laws. Each of the members put forth ideas in news releases last week, but the meeting was their first chance to discuss options.

With both Gov. Kate Brown and State Treasurer Tobias Read suggesting state bonding to purchase at least part of the forest, Secretary of State Dennis Richardson, the third member, observed early on that the sale was clearly “dead.”

What remained was to explore how the board could meet its fiduciary duty to manage the land for funding education while answering pressure to keep the land in the public domain. As trustees of the Common School Fund, the State Land Board is legally required to manage the land for the benefit of the fund.

OSBA said in a letter last week that it would consider legal action if the board didn’t fulfill its fiduciary duty to the fund. OSBA Executive Director Jim Green testified before the board Tuesday, saying that any solution had to still provide full value for schools.

The Elliott State Forest was created specifically to generate money for the Common School Fund. Environmental protections for the coastal coho salmon, the spotted owl and especially the marbled murrelet have reduced logging to the point that in 2012 it was costing more to manage the forest than the forest was making. With the forest creating a loss for the education fund, it was put up for sale in 2015.

Provisions for recreation, jobs and conservation limited the land’s value, and the forest was appraised at $221 million. The board got one bid, from the Lone Rock Timber Co. in partnership with the Cow Creek Band of Umpqua Indians.

The purchase price would have gone into the Common School Fund, where it would have earned interest that could be applied to schools, thus creating an ongoing funding source. The Common School Fund earned 6.09 percent in 2016, according to its annual report. At that rate, the full sale price of the land would have earned more than $13 million a year.

Brown, who opposed the sale at the last meeting, proposed that the state buy riparian areas, old growth and steep slopes in the Elliott for $100 million and log the rest to generate additional income for schools. Read built off that plan and proposed that the state put in a “down payment” of $100 million to the Common School Fund, and within the next six years, Oregon State would buy the land for $120 million.

At the meeting, OSU President Ed Ray and Dean of the College of Forestry Thomas Maness expressed excitement at the research possibilities for the university. OSU, which has other forestland for research, does not have habitat for the spotted owl, the marbled murrelet or the coastal coho. The Elliott purchase would also assist the university’s study of logging techniques for steep slopes, better ways to create openings for Douglas fir growth and differences in streamside buffers.

Maness said adding that big of a forest would make OSU a global leader.

“There is no other school in the world that would have that opportunity,” he said.

But OSU’s ability to buy the land would depend on state support.

“I don’t have $120 million lying about,” Ray said. “I don’t expect to have it in the future.”

Brown says the Legislature has pledged support for bonding, but that could cut into the state’s ability to bond for other projects, including construction for schools and universities.

Both plans rely heavily on being able to hammer out a Habitat Conservation Plan that covers multiple uses, including logging. Richardson expressed skepticism that such a plan could be created, as the last one was terminated in 2011 because agreement couldn’t be reached.

Liz Dent, chief of the Oregon Department of Forestry’s State Forests Division, said moving the land out of the Common School Fund could make a deal easier.

The State Land Board’s fiduciary duty to the Common School Fund calls for maximizing logging, while the duty of the U.S. Fish and Wildlife Service and the National Marine Fisheries Service calls for maximizing protection for endangered species.

The Elliott State Forest could sustain up to about 40 million board feet a year in harvests if it were in private hands and there were no conservation or environmental protections, according to Dent. In recent years, the logging has been closer to 7 million board feet.

“Public ownership with that low level of harvest is not financially sustainable,” Dent said in an interview. “We need something closer to, in my opinion, 20 million board feet a year.”

If the land isn’t in the Common School Fund, that middle ground is more achievable.

Under Read’s plan, the forest would remain an asset of the school fund while the conservation plan is being negotiated. If OSU doesn’t buy the forest by 2023, the state would take portions of the forest for conservation or look for other buyers for all or part of the land.

Richardson, however, would like to see the state find another way. Richardson proposed trading sensitive habitat and old growth areas of the Elliott for federal lands that are more amenable to commercial logging.

“It is a mistake to borrow money to buy land we own,” Richardson said.

Read, in an interview, said there is no easy way around the fundamental tension between the board’s obligations to schoolchildren and the desire to keep the land public.

“There is a price to pay for that. We have to compensate the Common School Fund,” Read said. “One thing we have accomplished is giving some time for that conservation to proceed more thoughtfully and deliberately, and deescalating the tension.”

While the board considers its next option, Lone Rock’s purchase offer was left on the floor.

“Our $221 million offer was real and that could generate $15 to $17 million a year,” said Jake Gibbs, director of external affairs for Lone Rock. “We are very disappointed.”

OSBA remains open to potential solutions.

“We will continue to monitor the issues surrounding the Elliott Forest to ensure it does not become a drag on the Common School Fund,” said OSBA’s Green. “The State Land Board must fulfill its fiduciary obligations to the Common School Fund and the schoolchildren of Oregon.”